Exchanges hit roadblocks in red states

The Cato Institute’s Michael Cannon’s been racking up frequent-flier miles.

He’s dropped in on more than a dozen states to make the case to lawmakers that they should not lift one legislative finger to implement President Barack Obama’s health reform.

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“It has been a fun ride,” he said.

Conservatives like John Graham of the Pacific Research Institute have also been touring states with the platform provided by the American Legislative Exchange Council to help kill off state-based exchanges, a key piece of health reform that will help millions of people purchase insurance coverage — often with federal subsidies — starting in 2014.

“Our approach has to be absolute noncollaboration, civil disobedience — well, not civil disobedience but resistance … by whatever means,” said Graham.

Two years into the law’s implementation, conservative emissaries have contributed to impressive stats. Almost all red states are holding off on exchange legislation at least until the Supreme Court decides on the Affordable Care Act, and in most of those states, exchange-building legislation has crawled to a stop.

Both funded partly by the Koch brothers, Cato and ALEC form the cavalry that state-based conservative organizations call in to convert Republican lawmakers who have been considering establishing exchanges. While they’re no fans of the federal law, many Republicans in state government thought it was better to set up their own exchange than to let the Department of Health and Human Services do it for them if the law survives past 2012.

Some still think that — and disagree with some of the assumptions and interpretations the fly-in conservatives are making. But Cannon and Graham are undeterred.

“Every time when I go into these states, there are usually a bunch of Republican politicians who have bought this line that creating a state exchange will protect them from Obamacare,” said Cannon. “It’s fun going in there and telling them, ‘No actually, if you want to protect your state, tell the federal government: … It’s your stupid law; you implement it.’”

In his view, state autonomy under health reform is a mirage. States won’t actually have much control because the federal rules governing the exchanges are so far-reaching. The sole difference between a state-run and federal-run exchange, he said, is that a state will have to “to pay for the privilege of having their autonomy taken from them” if they pass their own bill.

Second, he argues that if states don’t act, employers will be better positioned to legally challenge penalties they would have to pay if their employees end up getting subsidized coverage in the exchanges. Cannon contends that the legislation as drafted only allows the subsidies to be given through a state exchange — not a federal one. Most legal experts think this is a drafting error that the Obama administration can fix through regulation, but Cannon believes the courts will strike down any workaround.